Question: Does the five-tier system change insurance cover requirements, or only valuation timing and reporting?
I’ve read that Victoria moved to a five-tier system for owners corporations. Our building is a tier 2. I think this affects how often we need a valuation, but does it change anything about the type or amount of insurance cover we’re required to carry, like minimum sums insured or specific cover types?
Or is the tier system only really about valuation timing and reporting, and the actual cover requirements are the same regardless of tier?
Answer: The five-tier system doesn’t change insurance requirements. Only tier five carries exemptions.
The introduction of the five-tier system in Victoria does not change the insurance requirements for Tier 1 to Tier 4 owners corporations. These tiers are all subject to the same legislative requirements regarding building insurance and valuations.
For Tier 1 to Tier 4 owners corporations:
- The owners corporation is required to insure the building for its full replacement and reinstatement value in accordance with the Owners Corporations Act 2006.
- The level and type of insurance required do not change based on the tier classification.
- An independent insurance valuation is generally required at least every five years to ensure the building is insured for its full replacement and reinstatement value.
The exception is Tier 5, which generally includes two-lot subdivisions and certain services-only owners corporations. Tier 5 owners corporations are exempt from the statutory requirement to obtain a valuation every five years. They also have certain exemptions from the Act’s insurance provisions. For example, two-lot subdivisions are generally not required to arrange owners corporation building or public liability insurance under the Act, although obtaining appropriate insurance is still strongly recommended. In some circumstances, owners may instead arrange insurance individually rather than through the owners corporation.
Accordingly, unless your owners corporation falls within the Tier 5 exemptions, the insurance and valuation requirements are effectively the same regardless of whether the owners corporation is classified as Tier 1, 2, 3 or 4.
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances and the specific coverage afforded under their policy wording. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.
This post appears in the July 2026 edition of The VIC Strata Magazine.
Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165
